Recession Coming? How it affects your Crowdfunding Investing

By Mark Robertson CrowdFundBeat  Sr. Contributing Editor. President at CrowdDD, LLC,

With the stock market in a virtual free fall and the drumbeat of a recession that is long overdue, what is a real estate crowdfunding investor to do?  The short answer is to be cautious, but do not panic.  Our economy has always been very cyclical and real estate in particular has always had very distinct cycles.  The last 6 years have been highlighted by a very slow and steady recovery from our 2009 lows, but all good things must come to an end and we as investors must be prepared.

9b7a06bac0f59bde99edf01d406f6b9f

 

 

 

 

 

 

No one knows exactly when the next recession will hit, but we do know it will hit. We are over due.  I suspect it will not be as severe as the “Great Recession”, but there will be significant pain for investors if they do not proceed cautiously. Over the last 6 months, I have changed my investment philosophy and criteria for both equity and debt investments.

On the real estate debt side I have pulled back quite a bit.  I still invest with Patch of Land, but I am now very picky on which loans I pick up.   I no longer invest in homes that will sell for over $500,000.  The high end will be the first to go south in a slowdown.  Most of my high dollar fix and flip loans from 2014 took well over a year to sell and some sold for 75% of the projected ARV.  All my Patch of Land investments paid on time and I had no defaults.  One high end loan on Realty shares returned all of the principle, but did not pay any interest.  My new loan criteria is an LTV of 65% or less with an ARV of between $125,000 and $400,000.  Ie house selling close to the median price.  The very cheap houses in the “ghetto” are also way too risky at this stage of the cycle.  Invest in properties that will have the most buyers when complete.

On the corporate debt side, I redeemed my investment in the Broadmark commercial debt fund, I turned off auto investing with Funding circle, and I am no longer investing with Bolstr.  I recently wrote a blog post about my reservations with Bolstr and may invest again in the future if they revamp their due diligence process.

On the equity side, it’s also time to be a bit cautious.  I am staying away from deals that are highly leveraged (over 75%) and from deals that rely on variable rate debt.  80% of my investments have been in counter cyclical plays such as self-storage and mobile home parks.  I am also considering value add projects that have a compelling story. I think it’s the wrong time to invest in the typical low cap rate strip centers or office buildings.  It will be very tough to make money on sub 6% cap rates with either rising interest rates or a recession.  Building up some cash will be prudent as bargains pop up over the next few years.

Tags: , , , , , ,

nov2017-fintech confernce-dc

HEADLINE NEWS

LeaflyCrowdfunding Site Cancels Aid to California Wildfire Victims—Because CannabisLeaflyWithin days, Hezekiah Allen, CGA's founder and executive director, had set up a campaign on the San Francisco-based crowdfunding website YouCaring to collect donations to help the farmers rec [...]

Food & Wine (blog)Crowdfunding Campaign Seeks $213 Billion to Buy Anheuser-Busch InBevFood & Wine (blog)With a goal that is impossible to reach, "Take Back Craft" (as the crowdfunding campaign is called) is admittedly a marketing campaign first. Jokingly, this " [...]

RecodeCrowdfunding site Indiegogo will now let you sell products as it shifts ...RecodeIn the past, entrepreneurs on the crowdfunding site Indiegogo could offer contributors a gift in exchange for cash. Then a year ago, they could begin offering ...and more » [...]

EW.comAdam Goldberg launches crowdfunding effort for Hebrew Hammer sequelEW.comFourteen years after Adam Goldberg first donned the Jewish crimefighter's overcoat and yarmulke, the actor is ready for another round. Goldberg, director Jonathan Kesselman, and producer Harrison Huffm [...]

Phoenix Business JournalCrowdfunding comes to Arizona real estatePhoenix Business Journal“The new crowdfunding legislation has empowered all Arizonans with the opportunity to invest locally in business startups, which had been for decades, reserved for only qualified investors. Neighb [...]

ForbesThe Recipes For Crowdfunding Success On Kickstarter -- And What To AvoidForbesToo little is known about the recipes for a successful crowdfunding drive for a new product. And there is even less known about online drives, despite its meteoric success over the past decade. A 2013 [...]

YOU CAN HELP: Friends launch crowdfunding campaign for Admiral attack victim and familyWest Seattle Blog (blog)After an Admiral woman was stabbed last week while walking with her baby on 41st SW, many people asked how the community could help with her recovery. Now, there's a way [...]

Hour Detroit MagazineHow Crowdfunding is Helping Detroit Families Stay in Their HomesHour Detroit MagazineThe Tricycle Collective has a unique approach to helping Detroiters fight tax foreclosure.and more » [...]

KTUU.comWasilla police meets crowdfunding goal for new K9 OfficerKTUU.comWASILLA, Alaska (KTUU) - The Wasilla Police Department announces that enough money was raised to purchase a new police dog, following the death of K9 Marshal. The announcement comes Monday, five months after crow [...]

PR Web (press release)CCA Announces Availability Comprehensive Crowdfunding DatabasePR Web (press release)Miami, Florida (PRWEB) October 17, 2017 -- Today at a Private Capital Markets forum, Crowdfund Capital Advisors (CCA) announced immediate availability of.and more » [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |